Editing K-Line (section)

==Demise==

K-Line and Lionel were known to criticize one another's offerings in print advertisements, and the two companies challenged one another in court as well.  The two companies settled the suit on August 10, with K-Line agreeing to withdraw the infringing products by January 31, 2006 and paying a royalty to Lionel in the interim. K-Line also licensed some of its technology to Lionel, and reimbursed $700,000 of legal costs. Shortly thereafter the settlement fell apart and on August 23, 2005, MDK filed for Chapter 11 bankruptcy protection. On October 27, K-Line and Lionel reached a new settlement, including a permanent injunction against manufacturing products containing the disputed technology, a $2 million damage claim in its bankruptcy case, and royalty-free access to several K-Line patents.

K-Line's 2005 bankruptcy petition stated that its annual sales were between $7 and $8 million.

Over the next few months, K-Line's operations slowed and there were numerous layoffs and rumors of potential purchasers, which were highly publicized among hobbyists. On February 16, 2006, Lionel announced it had purchased K-Line. Since Lionel was also in bankruptcy, the deal, which actually involved the purchase of K-Line by Sanda Kan, its Chinese subcontractor, followed by Sanda Kan's licensing of the trademarks and intellectual property to Lionel, took several weeks to become final. The deal was finalized on April 18, 2006, and Lionel made the announcement the following day.

From 2006 through 2010, Lionel continued a limited run of K-Line trains called K-Line by Lionel, and issued separate K-Line by Lionel catalogs until 2010, when those products were folded into a section in Lionel's own catalog.

During the first few years of this K-line by Lionel period, the extravagant passenger trains which competed directly with Lionel's premium products were conspicuously absent, with the initial offerings focusing more on K-Line's value line.  Increasing amounts of scale products, including some of the well known 21-inch alumumum passenger cars, were added late in Lionel's license period.

In a twist of fate, Lionel now has possession of the rights to produce American Flyer track, which until now was missing from its American Flyer train line.

More recently, the Lionel license expired, and Sanda Kan sold the dies to several other companies, with some going to each of Atlas, Bachmann, and RMT.